Flood of Comments Prompts IRS to Rethink Rule Limiting Political Activity of Nonprofits

By Danielle Wiener-Bronner

May 23, 2014

The IRS issued a statement on Thursday saying it is considering maybe, possibly revising new regulations on "social welfare" groups' political activity after the rules, proposed last year, prompted more than 150,000 negative comments. The IRS said:

It is likely that we will make some changes to the proposed regulation in light of the comments we have received. Given the diversity of views expressed and the volume of substantive input, we have concluded that it would be more efficient and useful to hold a public hearing after we publish the revised proposed regulation.

Bloomberg Businessweek reports that the new rules were supposed to offer guidance for nonprofit groups, classified as such under section 501(c)(4) of the tax code, on the types of political activity that would cost them certain tax exemptions or force them to out donors. Per the IRS:

The Treasury Department and the IRS propose to amend Treas. Reg. § 1.501(c)(4)–1(a)(2) to identify specific political activities that would be considered candidate-related political activities that do not promote social welfare.

The IRS proposed deleting the clause's reference to "direct or indirect participation or intervention in political campaigns on behalf of or in opposition to any candidate for public office,’’ and replacing it with the supposedly clearer "[t]he promotion of social welfare does not include direct or indirect candidate-related political activity.’’ Similarly, the agency wants to replace ‘‘participation or intervention in political campaigns on behalf of or in opposition to any candidate for public office," with "‘candidate-related political activity."

Apparently, people are not happy with the changes. Last month, IRS Commissioner John Koskinen told the Washington Post that the high volume of comments was making it difficult to forge ahead with the proposed rule:

[Koskinen said] te IRS is still handling more than 150,000 comments it received before the initial public-input phase ended in February. “When you have this many comments, you have to listen to them,” he said. “My goal is to have an open mind about this, so I don’t come at it with a prejudgment.”

The Post adds that the IRS was fielding criticism from both ends of the political spectrum:

Lawmakers and policy analysts at both ends of the political spectrum have criticized the draft guidelines, which would bar tax-exempt groups from engaging in certain election-related activities, including voter-registration and get-out-the-vote drives. Conservatives have argued that the proposals are part of an Obama administration plot to silence criticism from the right. Liberals, many of whom contend that groups are using their tax-exempt status to influence elections without disclosing their donors, have said the plans simply go too far and need reworking.

Finally, an issue the right and left both hate enough to try to successfully derail. Good job, team.